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Item 1. Financial Statements

2023-07-19 compared with 2023-01-25 · 102 added, 126 removed, 177 unchanged (56% of the section changed)

2 unchanged sentences

BALANCE SHEETS

December 31, 2022

June 30, 2023

March 31, 2023*

1 unchanged sentence

Cash and cash equivalents

Marketable securities, short-term

Accounts receivable, net of allowance for uncollectible accounts of $ 15,000

Marketable securities, short-term (amortized cost of $ 12,300,315 as of June 30, 2023,

and $ 15,696,135 as of March 31, 2023)

Accounts receivable, net of allowance for credit losses of $ 227,440 as of June 30, 2023,

and $ 15,000 as of March 31, 2023

Prepaid expenses and other assets

5 unchanged sentences

Deferred tax assets

Marketable securities, long-term

Marketable securities, long-term (amortized cost of $ 41,447,065 as of June 30, 2023, and $ 37,495,846 as of March 31, 2023)

Right-of-use asset – operating lease

9 unchanged sentences

Common stock, $ 0.01 par value, 6,000,000 shares authorized;

4,830,826 issued and outstanding as of December 31 and March 31, 2022

4,833,401 issued and outstanding as of June 30, 2023, and 4,830,826 as of March 31, 2023

Additional paid-in capital

7 unchanged sentences

STATEMENTS OF INCOME

Quarter Ended December 31,

Product sales

Contract research and development

Total revenue

Cost of sales

Research and development

Selling, general, and administrative

Total expenses

Income from operations

Interest income

Income before taxes

Provision for income taxes

Net income per share – basic

Net income per share – diluted

Cash dividends declared per common share

Weighted average shares outstanding

STATEMENTS OF COMPREHENSIVE INCOME

Quarter Ended December 31,

Unrealized gain (loss) from marketable securities, net of tax

Comprehensive income

See accompanying notes.

NVE CORPORATION

STATEMENTS OF INCOME

Nine Months Ended December 31,

Quarter Ended June 30,

Product sales

4 unchanged sentences

Selling, general, and administrative

Credit loss expense

Total expenses

8 unchanged sentences

STATEMENTS OF COMPREHENSIVE INCOME

Nine Months Ended December 31,

Quarter Ended June 30,

Unrealized loss from marketable securities, net of tax

6 unchanged sentences

Balance as of March 31, 2023

Exercise of stock options

Comprehensive income:

4 unchanged sentences

Balance as of June 30, 2023

Comprehensive income:

Unrealized loss on marketable securities, net of tax

Total comprehensive income

Stock-based compensation

Cash dividends declared ($1.00 per share of common stock)

Balance as of September 30, 2022

Comprehensive income:

Unrealized gain on marketable securities, net of tax

Total comprehensive income

Stock-based compensation

Cash dividends declared ($1.00 per share of common stock)

Balance as of December 31, 2022

See accompanying notes.

10 unchanged sentences

Balance as of June 30, 2022

Comprehensive income:

Unrealized loss on marketable securities, net of tax

Total comprehensive income

Stock-based compensation

Cash dividends declared ($1.00 per share of common stock)

Balance as of September 30, 2021

Exercise of stock options

Comprehensive income:

Unrealized loss on marketable securities, net of tax

Total comprehensive income

Stock-based compensation

Cash dividends declared ($1.00 per share of common stock)

Balance as of December 31, 2021

See accompanying notes.

1 unchanged sentence

STATEMENTS OF CASH FLOWS

Nine Months Ended December 31,

Quarter Ended June 30,

OPERATING ACTIVITIES

1 unchanged sentence

Depreciation and amortization

Provision for current estimate of credit losses

Stock-based compensation

10 unchanged sentences

Receipt of tenant improvement allowance

Net cash provided (used) by investing activities

( 8,676,229 )

Net cash (used) provided by investing activities

FINANCING ACTIVITIES

Proceeds from exercise of stock options

Payment of dividends to shareholders

Cash used in financing activities

Decrease in cash and cash equivalents

(Decrease) increase in cash and cash equivalents

Cash and cash equivalents at beginning of period

11 unchanged sentences

In the opinion of management, these financial statements reflect all adjustments, consisting only of normal and recurring adjustments, necessary for a fair presentation of the financial statements.

Although we believe that the disclosures are adequate to make the information presented not misleading, certain disclosures have been omitted as allowed, and it is suggested that these unaudited financial statements be read in conjunction with the audited financial statements and the notes included in our latest annual financial statements included in our Annual Report on Form 10-K for the fiscal year ended March 31, 2022.

The results of operations for the quarter and nine months ended December 31, 2022 are not necessarily indicative of the results that may be expected for the full fiscal year ending March 31, 2023.

Although we believe that the disclosures are adequate to make the information presented not misleading, certain disclosures have been omitted as allowed, and it is suggested that these unaudited financial statements be read in conjunction with the audited financial statements and the notes included in our latest Annual Report on Form 10-K for the fiscal year ended March 31, 2023.

The results of operations for the quarter ended June 30, 2023, are not necessarily indicative of the results that may be expected for the full fiscal year ending March 31, 2024.

Significant accounting policies

A description of our significant accounting policies is provided in Note 2 to the Financial Statements in our Annual Report on Form 10-K for the year ended March 31, 2023.

As of December 31, 2022, there were no changes to our significant accounting policies.

RECENTLY ISSUED ACCOUNTING STANDARDS

As of June 30, 2023, there were no changes to our significant accounting policies except for changes resulting from the adoption of Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No.

2016-13, Financial Instruments—Credit Losses (ASC Topic 326) as described in the “Marketable securities and credit losses” section below and in Note 3.

Marketable securities and credit losses

Our marketable securities consist of corporate bonds and money market funds.

Marketable are initially recognized at cost.

Marketable securities considered to be “purchased financial assets with credit deterioration” are initially recognized at cost, less any allowance for expected credit losses.

Unrealized holding gains and losses are reported in other comprehensive income, net of applicable taxes, until realized.

All marketable securities are carried on the balance sheet at fair value.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.

We use a three-level fair value hierarchy in estimating and reporting fair values of our marketable securities:

Level 1 – Securities whose fair values are determined using quoted prices in active markets for identical securities.

Level 2 – Securities whose fair values are determined using quoted prices for similar securities in active markets or quoted prices for identical securities in markets that are not active.

Level 3 – Securities whose fair values are determined using unobservable inputs.

Corporate bonds with remaining maturities of less than one year are classified as short-term and those with remaining maturities of one year or more are classified as long-term.

We consider all highly liquid investments with maturities of three months or less when purchased, including money market funds, to be cash equivalents.

We measure credit losses on our marketable securities at the individual security level, using the present value of expected cash flows method.

Credit losses are measured as the amount by which the amortized cost basis of the security exceeds the present value of expected cash flows (discounted at the effective interest rate implicit in the security at the date of acquisition), limited by the amount by which the fair value of the security is less than its amortized cost basis.

When estimating expected cash flows, we consider available information relating to past events, current conditions, and reasonable and supportable forecasts such as, past incidences of default, credit quality as reported by credit rating agencies, extent of impairment, length of time the security has been in a continuous unrealized loss position, and adverse conditions forecasted by industry, financial and economic experts that are relevant to the collectability of expected cash flows.

We do not include accrued interest receivables in amortized cost and in fair value when measuring expected credit losses.

We will write off uncollectible accrued interest receivable to net income in a timely manner, by reversing interest income, and therefore do not measure credit losses for accrued interest receivable.

Timely manner means one year from the date the accrued interest receivable becomes past due.

Accrued interest receivables are included in the balance sheet in “prepaid expenses and other assets.”

Accounts Receivable and Allowance for Credit Losses

We grant credit to customers in the normal course of business and at times require customers to pay for orders before shipment.

Accounts receivable are presented on the balance sheet net of any allowance for credit losses.

We measure credit losses on our trade accounts receivable on a pool basis, and in some cases, on an individual basis, using the loss-rate method.

Accounts receivable are pooled based on geographical locations because we believe accounts originating from the same geographical location share risk characteristics.

When estimating expected credit losses on our trade accounts receivable, we consider available information relating to past events, current conditions, and reasonable and supportable forecasts such as, historical loss rate, current age of and the remaining term of the receivable relative to our current days sales outstanding (“DSO”) ratio, and pending orders of the customer relative to accounts receivable balance as of the reporting date.

RECENTLY ADOPTED ACCOUNTING STANDARD

In May 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No.

2021-04, Earnings Per Share (Topic 260), Debt—Modifications and Extinguishments (Subtopic 470-50), Compensation—Stock Compensation (Topic 718), and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40) Issuer’s Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options .

ASU 2021-04 addresses issuers’ accounting for certain modifications or exchanges of freestanding equity-classified written call options.

We adopted ASU 2021-04 beginning with the quarter ended June 30, 2022.

The adoption had no material impact on our financial statements.

New Accounting Standard Not Yet Adopted

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments-Credit Losses (Topic 326), Measurement of Credit Losses on Financial Statements .

ASU 2016-13 requires a financial asset (or a group of financial assets) measured at amortized cost basis to be presented at the net amount expected to be collected.

ASU 2016-13 requires a financial asset (or a group of financial assets) to be presented at the net amount expected to be collected.

The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial asset(s) to present the net carrying value at the amount expected to be collected on the financial asset.

12 unchanged sentences

which modifies the measurement of expected credit losses of certain financial instruments.

In accordance with ASU 2019-10 and ASU 2020-02, ASU 2016-13 is effective for certain Smaller Reporting Companies for financial statements issued for fiscal years beginning after December 15, 2022 and interim periods within those fiscal years, which will be fiscal 2024 for us if we continue to be classified as a Smaller Reporting Company, with early adoption permitted.

We are evaluating the potential impact of ASU 2016-13 on our financial statements.

We adopted ASU

2016-13 beginning with the quarter ended June 30, 2023.

The adoption resulted in disclosure changes and required us to consider the likelihood of default and to measure our allowance for credit losses over the contractual term of our receivables.

The adoption did not have a material impact on the financial statements as of April 1, 2023.

Under these requirements, we increased our allowance for credit losses by $212,440 on our balance sheet as of June 30, 2023, and recorded a corresponding credit loss expense in our income statement for the quarter ended June 30, 2023, which decreased net income by the same amount.

This reduced our net income per share by $0.04 for the quarter ended June 30, 2023.

The adoption had no net impact on cash flows.

NET INCOME PER SHARE

2 unchanged sentences

The following tables show the components of diluted shares:

Quarter Ended December 31,

Weighted average common shares outstanding – basic

Dilutive effect of stock options

Shares used in computing net income per share – diluted

Nine Months Ended December 31,

Quarter Ended June 30,

Weighted average common shares outstanding – basic

1 unchanged sentence

Shares used in computing net income per share – diluted

FAIR VALUE OF FINANCIAL INSTRUMENTS

Our corporate bonds and money market funds are classified as available-for-sale securities and carried at estimated fair value.

Unrealized holding gains and losses are included in accumulated other comprehensive income (loss) in the statement of shareholders’ equity.

Corporate bonds with remaining maturities less than one year are classified as short-term, and those with remaining maturities greater than one year are classified as long-term.

We consider all highly-liquid investments with maturities of three months or less when purchased, including money market funds, to be cash equivalents.

Gains and losses on marketable security transactions are reported on the specific-identification method.

Contractual maturities of available-for-sale securities as of December 31, 2022 are as follows:

Total available-for-sale securities represented approximately 79% of our total assets as of December 31, 2022.

Marketable securities as of December 31, 2022 had remaining maturities between six days and 76 months.

Generally accepted accounting principles establish a framework for measuring fair value, provide a definition of fair value, and prescribe required disclosures about fair-value measurements.

Generally accepted accounting principles define fair value as the price that would be received to sell an asset or paid to transfer a liability.

Fair value is a market-based measurement that should be determined using assumptions that market participants would use in pricing an asset or liability.

Generally accepted accounting principles utilize a valuation hierarchy for disclosure of fair value measurements.

The categorization within the valuation hierarchy is based on the lowest level of input that is significant to the fair value measurement.

The categories within the valuation hierarchy are described as follows:

Level 1 – Financial instruments with quoted prices in active markets for identical assets or liabilities.

Level 2 – Financial instruments with quoted prices in active markets for similar assets or liabilities.

Level 2 fair value measurements are determined using either prices for similar instruments or inputs that are either directly or indirectly observable, such as interest rates.

Level 3 – Inputs to the fair value measurement are unobservable inputs or valuation techniques.

The following table shows the estimated fair value of assets that were accounted for at fair value on a recurring basis:

As of December 31, 2022

MARKETABLE SECURITIES

The following table shows the major categories of our marketable securities and their contractual maturities as of June 30, 2023:

Money market funds

Corporate bonds

Total marketable securities represent approximately 78% of our total assets as of June 30, 2023.

Marketable securities as of June 30, 2023, had remaining maturities between three weeks and 70 months.

Money market funds are included on the balance sheets in “Cash and cash equivalents.” Corporate bonds are included on the balance sheets in “Marketable securities, short term” and “Marketable securities, long term.” Accrued interest receivables were $ 418,336 as of June 30, 2023, and $ 425,372 as of March 31, 2023, and are included in the balance sheets in “Prepaid expenses and other assets.”

We monitor the credit ratings of our marketable securities at least quarterly as reported by Standard & Poor’s.

The following table summarizes the fair values of our marketable securities as of June 30, 2023, aggregated by credit rating:

Credit Rating

The following table shows the estimated fair value of our marketable securities, aggregated by fair value hierarchy inputs used in estimating their fair values:

As of June 30, 2023

As of March 31, 2023

1 unchanged sentence

Corporate bonds

Our available-for-sale securities as of December 31 and March 31, 2022, aggregated into classes of securities, were as follows:

As of December 31, 2022

The following table shows the amortized cost, fair value and gross unrealized holding gains and losses of our marketable securities as of June 30 and March 31, 2023:

As of June 30, 2023

As of March 31, 2023

1 unchanged sentence

Corporate bonds

The following table shows the gross unrealized holding losses and fair value of our available-for-sale securities with unrealized holding losses, aggregated by class of securities and length of time that individual securities had been in a continuous unrealized loss position as of December 31 and March 31, 2022.

The following table shows the gross unrealized holding losses and estimated fair value of our marketable securities for which an allowance for credit losses has not been recorded, aggregated by category of securities and length of time that individual securities had been in a continuous unrealized loss position as of June 30 and March 31, 2023.

Less Than 12 Months

12 Months or Greater

As of December 31, 2022

As of June 30, 2023

Corporate bonds

1 unchanged sentence

Corporate bonds

None of the securities were impaired at acquisition, and subsequent declines in fair value are not attributed to declines in credit quality.

When evaluating for impairment we assess indicators that include, but are not limited to, earnings performance, changes in underlying credit ratings, market conditions, bona fide offers to purchase or sell, and ability to hold until maturity.

Because we believe it is more likely than not we will recover the cost basis of our investments, we did not consider any of our marketable securities to be impaired as of December 31, 2022.

None of the securities were impaired at acquisition, and subsequent declines in fair value are attributable to interest rate increases.

We do not intend to sell, and it is not more likely than not that we will be required to sell, these securities before recovery of their amortized cost basis.

The issuers continue to make timely interest payments on these securities.

Because we believe it is more likely than not we will recover the cost basis of our investments, we did not record any impairment attributable to credit losses.

None of the marketable securities purchased during the period had experienced more-than-insignificant deterioration in credit quality since its origination and were therefore not considered “Purchased Financial Assets with Credit Deterioration.”

Unrealized losses on our marketable securities and their tax effects are as follows:

Quarter Ended June 30,

Unrealized loss from marketable securities

Unrealized loss from marketable securities, net of tax

ALLOWANCE FOR CREDIT LOSSES ON ACCOUNTS RECEIVABLES

The following table shows a roll forward of the allowance for credit losses on our accounts receivable:

Allowance for credit losses as of March 31, 2023

Change in provision for current expected credit losses

Allowance for credit losses as of June 30, 2023

Inventories are shown in the following table:

December 31, 2022

June 30, 2023

March 31, 2023

4 unchanged sentences

STOCK-BASED COMPENSATION

Stock-based compensation expense was $ 7,133 for the third quarter of fiscal 2023, $ 8,799 for the third quarter of fiscal 2022, $ 54,218 for the first nine months of fiscal 2023, and $ 73,036 for the first nine months of fiscal 2022.

We calculate the share-based compensation expense using the Black-Scholes standard option-pricing model.

Stock-based compensation expense was $ 10,536 for the first quarter of fiscal 2024 and $ 7,134 for the first quarter of fiscal 2023.

We calculate share-based compensation expense using the Black-Scholes-Merton standard option-pricing model .

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.

As of December 31, 2022, federal and state estimated tax overpayments of $ 291,000 were included in prepaid assets.

We had no unrecognized tax benefits as of December 31, 2022, and we do no t expect any significant unrecognized tax benefits within 12 months of the reporting date.

As of June 30, 2023, federal and state estimated tax liabilities of $ 453,591 were included in the balance sheet in “Accrued payroll and other.”

We had no unrecognized tax benefits as of June 30, 2023, and we do no t expect any significant unrecognized tax benefits within 12 months of the reporting date.

We recognize interest and penalties related to income tax matters in income tax expense.

As of December 31, 2022 we had no accrued interest related to uncertain tax positions.

As of June 30, 2023, we had no accrued interest related to uncertain tax positions.

The tax years 2019 through 2023 remain open to examination by the major taxing jurisdictions to which we are subject.

We conduct our operations in a leased facility under a non-cancellable lease expiring March 31, 2026.

Our lease does not provide an implicit rate, so we used our incremental borrowing rate to determine the present value of lease payments.

Our lease does not provide an implicit interest rate, so we used our incremental borrowing rate to determine the present value of lease payments.

Lease expense is recognized on a straight-line basis over the lease term.

Variable lease costs consist primarily of common area maintenance and real estate taxes which are paid based on actual costs incurred by the lessor.

Details of our operating lease are as follows:

Quarter Ended December 31, 2022

Nine Months Ended December 31, 2022

Quarter Ended June 30, 2023

Operating lease cost

Variable lease cost

Cash paid for amounts included in the measurement of lease liabilities

2 unchanged sentences

Discount rate

The following table presents the maturities of lease liabilities as of December 31, 2022:

As of December 31, 2022

Operating Leases

The following table shows the maturities of lease liabilities as of June 30, 2023:

Year Ending March 31,

Operating Lease Liabilities

Total lease payments

3 unchanged sentences

On January 21, 2009, we announced that our Board of Directors authorized the repurchase of up to $ 2,500,000 of our Common Stock from time to time in open market, block, or privately negotiated transactions.

The timing and extent of any repurchases depends on market conditions, the trading price of the company’s stock, and other factors, and subject to the restrictions relating to volume, price, and timing under applicable law.

The timing and extent of any repurchases depend on market conditions, the trading price of the company’s stock, and other factors, and subject to the restrictions relating to volume, price, and timing under applicable law.

On August 27, 2015, we announced that our Board of Directors authorized up to $5,000,000 of additional repurchases.

1 unchanged sentence

The Program may be modified or discontinued at any time without notice.

We intend to finance any stock repurchases with cash provided by operating activities or maturating marketable securities.

The remaining authorization was $ 3,598,519 as of December 31, 2022.

We did no t repurchase any of our Common Stock during the first nine months of fiscal 2023.

We intend to finance any stock repurchases with cash provided by operating activities or maturing marketable securities.

The remaining authorization was $ 3,520,369 as of June 30, 2023.

We did no t repurchase any of our Common Stock during the first quarter of fiscal 2024.

INFORMATION AS TO EMPLOYEE STOCK PURCHASE, SAVINGS, AND SIMILAR PLANS

2 unchanged sentences

We make matching contributions of 100 % of the first 3 % of participants’ salary deferral contributions.

Our matching contributions were $ 21,484 for the third quarter of fiscal 2023, $ 21,579 for the third quarter of fiscal 2022, $ 73,661 for the first nine months of fiscal 2023, and $ 76,995 for the first nine months of fiscal 2022.

Our matching contributions were $ 27,078 for the first quarter of fiscal 2024 and $ 28,426 for the first quarter of fiscal 2023.

SUBSEQUENT EVENTS

On January 25, 2023 we announced that our Board of Directors had declared a quarterly cash dividend of $ 1.00 per share of Common Stock to be paid February 28, 2023 to shareholders of record as of the close of business January 30, 2023 .

On July 19, 2023 , we announced that our Board of Directors had declared a quarterly cash dividend of $ 1.00 per share of Common Stock to be paid August 31, 2023 , to shareholders of record as of the close of business July 31, 2023 .

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements